When it comes to saving money, do you have a plan that you follow? Or do you just add to a savings account now and then when you have a little extra cash? Sure, saving money at all is better than not saving money ever. But if you want to be smart about saving and actually have savings you can depend on — in instances like losing your job, starting a new business, buying a house, treating a debilitating illness, or simply retiring — you’ll need to amp up your money-saving skills immediately. Below, we’ll take a look at some of the different ways you can improve your decision-making skills when it comes to saving money.
Evaluate Your Spending Habits
It’s time to take a hard, long look at your current spending habits, and even your spending habits over time. Do you frequently spend money on things you never end up using, like trendy clothes, electronics, or endless subscriptions? Do you spend an excessive amount of money eating out? What about on buying things to impress other people, or to elevate your social status? Sure, you might learn some uncomfortable truths while evaluating your spending habits and the reasons behind why you spend money the way you do. But taking this step and responding in an actionable way to your findings will not only help you to save more money, but it will help make you happier.
According to Adam Bold, author of The Bold Truth About Investing: Ten Commandments for Building Personal Wealth, it’s crucial to determine the difference between wants and needs, and only buy things you need or that make you happy. Think about if what you want to buy will make you happy long-term, or if you’ll even use the item. For example, if you love a certain dress and “have to have it” but can’t picture yourself actually wearing it — be honest with yourself! — then don’t buy it. Found a dress that you love and know you’ll wear all the time? Go for it.
Stick to a Savings Plan, Even When Life Gets Harder
When it comes to improving your decision-making skills, there are a lot of important life lessons you can learn from a game of poker. Take it from millionaire and poker pro, Liv Boeree: “Like poker, life is also a game of skill and luck. And when it comes to the biggest things we care about — health, wealth, and relationships — these outcomes don't only depend on the quality of our decision making, but also on the roll of life's dice.” There’s a lot of chance involved in life, but there are also ways we can make good money decisions despite chance, or the “roll of life’s dice.”
One of those ways is to commit to a specific financial plan that focuses on numeric goals. To take saving seriously, it’s not a good idea to simply add to your account when you have some extra cash, or add varying amounts each month. Devote a specific percentage of your paycheck to your savings account, and stick to it each month, even when “chance” makes life a little harder. Set up automatic transfers so you won’t be tempted to spend that money. Of course, if you want to add more to your savings account each month, that’s fine — but at least commit to the minimum percentage. When saving, have specific numeric goals (not vague goals) such as how much you need to save each day or month to reach a specific amount you want to have by the time you’re retired.
Have More Than One Savings Account
So, you’ve now got a good job and want to plan for the future, but you’ve only got one savings account. A great way to get a better grip on your savings and keep track of your savings goals is to have multiple savings accounts. This is a lot easier to do now too with the help of online banking. Have one for emergencies, one specifically dedicated to buying a new car or house (or other big purchase), one for fun money (like vacations), and whatever else you want to save for. Then, figure out which savings accounts you want to prioritize within that list.
To build on that monthly savings goal mentioned above, each of these accounts could have a different contribution amount. For example, maybe you want to contribute 10 percent of your paycheck towards an emergency fund each month, but 1 to 5 percent towards an upcoming vacation. If all else fails and you’re not sure how to go about any of this, consider meeting with a financial advisor or downloading a financial planning app for some assistance.